Koramco The One REITs Significantly Raises Dividend Yield... Enhancing Investment Appeal

Achieving 100% Occupancy Rate to Enhance Profitability
No Refinancing Issues Until the End of 2025

‘Koramco The One REIT’ announced on the 28th that it has improved its leasing structure by achieving a 100% occupancy rate and raising the average rent within one year of its listing, thereby increasing its target dividend yield based on the public offering price to the 7% range.

Koramco The One REIT is a traditional office REIT listed on the KOSPI in March last year by Koramco Asset Trust, the undisputed No. 1 operator in this field with about a 20% market share in the domestic private REIT market. It manages the landmark office building in Yeouido Financial District, the ‘Hana Securities Building,’ and has secured major tenants including Hana Financial Group affiliates such as Hana Securities and Hana Bank, as well as global blue-chip companies like Intel Korea and Korea 3M.

At the time of listing, Koramco The One REIT set a target of quarterly dividends four times a year in February, May, August, and November, with an annual dividend yield of around 6.2% based on the public offering price, attracting investor interest as its stock price rose to the 6,700 KRW range in a short period. However, it has not been able to avoid the sharp interest rate hikes that began in the second half of the year and is currently experiencing a stock price slump below the public offering price along with other listed REITs.

Recently, Koramco Asset Trust, the asset management company of Koramco The One REIT, has planned to turn the real estate market downturn and high interest rate environment into an opportunity to enhance the competitiveness of this REIT by changing its management strategy.

Koramco Asset Trust first achieved a 100% occupancy rate by bringing in new tenants to the 1st and 2nd floors, which had remained vacant due to high rents. These spaces accounted for a high proportion of rental income relative to the leased area and had a significant impact on dividends.

Additionally, rental income was increased by renewing lease contracts with existing tenants reflecting actual inflation, and the lease structure was diversified by welcoming German logistics company ‘Kuehne + Nagel’ and ‘The Executive Centre (TEC)’ as new tenants in some spaces previously used by one of the major tenants, Korea 3M. TEC is known as a premium co-working office that leases only landmark buildings in each district, such as Gangnam Finance Center and Seoul Finance Center.

Generally, if leased spaces are concentrated with specific tenants, vacancy risk increases when the lease period ends, which can negatively affect dividends. Koramco Asset Trust proactively addressed this by diversifying tenants, actively utilizing the leasing flexibility of Koramco Asset Trust, an independent operator, unlike large corporate-sponsored REITs preparing for listing recently.

Through this, the dividend yield of Koramco The One REIT based on the public offering price has increased to an average of 6.5% per year, and especially from the 20th business period (from September 2023), which falls in the second half of the year, the dividend yield rises to the 7% range. This raises the initial target dividend yield of the low 6% range by about 1% within one year of listing, and based on the closing price of 4,190 KRW on the previous day, the market dividend yield approaches 9%. The market dividend yield is the value obtained by dividing the dividend per share by the current market price, representing the actual dividend yield an investor would receive if purchasing the stock today.

Moreover, thanks to refinancing completed in November 2020 during a low-interest-rate period with a fixed interest rate for five years, this REIT is free from interest rate risk, which is why it is evaluated as having secured dividend stability going forward.

Yoon Jang-ho, Vice President of Koramco Asset Trust, said, “Koramco The One REIT is a core office REIT managed by Koramco Asset Trust, the largest REIT operator in Korea, combining both stability and high profitability. We will continue to contribute to stable returns for investors through active management strategies such as continuous lease improvements and additional incorporation of high-quality assets.”